Funds worth Rs 160 bn getting stuck led to this mess: IL&FS tells staff

Crippled infrastructure development and finance company IL&FS has claimed that if funds worth Rs 160 billion stuck with concession authorities were released on time, it wouldn't have landed in the mess it is currently in.

In a letter to its employees, a copy of which is with PTI, Infrastructure Leasing & Financial Services (IL&FS), which earlier this month had defaulted on a Rs 10 billion loan from Sidbi, has claimed that around Rs 160 billion of group liquidity is stuck in claims and termination payments.

"Our monies were used to fund the cost and time overruns caused by concession authority delays in handing over right of way. It is our case that if concession authorities released our monies, which is around Rs 160 billion of IL&FS group liquidity and stuck in claims and termination payments, we would not be in the situation that we are in," IL&FS said in its letter.

The management also claimed that sufficient clarity will emerge after the September 15 board meeting.

IL&FS, which is credited for building the longest tunnel in the country named Chenani-Nashri tunnel, is sitting on a debt pile of around Rs 910 billion and had been junked by rating agencies following the default. Of this, Rs 570 billion are bank loans alone, most of which are from state-run lenders.

While IL&FS Transport Network, the holding firm of the group's road assets, has nearly Rs 350 billion consolidated debt, IL&FS Financial Services has Rs 170 billion of debt, which sits as standard asset for most banks, according to a Nomura India report.

Late last month, IL&FS had said it was planning to divest assets with a view to pare its debt by up to Rs 300 billion over the next 18 months and had approved a Rs 45-billion rights issue which will be completed by October.

It had identified 25 projects to sell, which the firm claimed will reduce its overall debt by Rs 300 billion.

The announcement came amid reports of mortgage lender HDFC, which owns 9 per cent of IL&FS, not being inclined to bail out the debt-ridden financier through the rights issue.

State-run LIC is the largest shareholder owning a fourth of the firm's equity, while Orix Corporation of Japan owns 23.5 per cent. Other shareholders include Abu Dhabi Investment Authority with 12.5 per cent, employees welfare trust with 12 per cent, Central Bank of India with 7.67 per cent and SBI with 6.42 per cent.

The company has also decided to infuse up to Rs 50 billion into group companies - IL&FS Financial Services, IL&FS Transportation, IL&FS Energy, IL&FS Environment and IL&FS Education.

Over the years, the company has invested over Rs 1.89 trillion in infrastructure projects, primarily in surface transport, energy, urban infrastructure and financial services.

Earlier this month, Icra had downgraded its debt by at least nine notches, citing cash crunch. It had reduced the rating on IL&FS' Rs 52.25 billion NCD and Rs 3.5-billion loans sharply to BB from AA+, a second downgrade after the rating was earlier cut from AAA to AA+ on August 7.

The downgrade had as many as 35 mutual fund schemes getting hit, according to a Nomura report.

On September 4, it came to light that IL&FS had defaulted on a short-term loan of Rs 10 billion from Sidbi, while a subsidiary has also defaulted on Rs 5 billion to the development financial institution, which reportedly forced Sidbi to ask its chief general manager in charge of the risk management department to resign.

Separately, Icra recently downgraded to 'D' from 'C' bank debt of Rapid Metrorail Gurgaon South for not making interest payment for August on time. Rapid Metrorail Gurgaon South is a special purpose vehicle sponsored by IL&FS Rail with 65 per cent stake and IL&FS Transportation Networks with the balance stake.